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Perplexing Prices

ISSUE:  Autumn 1938

Save America First. By Jerome Frank. New York: Harper and Brothers. $3.75. Price and Price Policies. By Walton Hamilton and Associates. New York: McGraw-Hill Book Company. $3.00.

The most significant thing in economic writing, in the period in which this reviewer has known anything about it, is the increasingly important place occupied by collectivism of one sort or another. As recently as twenty years ago, in all but heretic quarters, the capitalist system was taken for granted. It rested upon private property, was motivated by private profit, functioned by means of prices competitively determined. Some of the developments that have banished this complacency are the World War and its aftermath of world depression, the establishment of the Soviet Union, progressive attack by collectivist advocates, and increasingly apparent alterations within the capitalist system itself.

Capitalism is on the defensive. Collectivism is no longer treated in footnotes, as a dangerous or engaging proposal, as a chance or minor variant, but occupies the text. Even in the meticulous descriptions of industry, major economic premises obtrude. Economic literature, for all the haste of its preparation and fervor of its issuance, has reached a higher plane than it has occupied since the great days of Marx and Mill and George. Uneventful textual criticism, crossing of verbal swords, precious theory have given way to discussions in the large,

A particular cause, implicit in those recited above, has been the sudden and critical participation of economists in government during the emergency of depression. Especially was this a novelty in America. The Commerce Building in Washington became a composite college campus. Journal articles were replaced by official reports and memoranda, the lecture room became the conference room, the students were no longer credulous youngsters, but distracted business men equally under tutelage. The academic economist was jerked from deduction to decision. His ivory tower became a battlement. Rules in books and the recommendations of detached reflection were subjected to the unwonted test of market place, counting house, and production line.

Thus situated, the economists newly drawn into government service, with their cousins of the legal profession, had to turn two ways at once. They were inclined to conserve the old, while they found themselves compelled to make sweeping concessions to the new. They were not radicals, even though most newspapers soon called them that. Very few among them had ever declared themselves in favor of an economic system based directly upon production for use instead of for profit, with common ownership of the means of production to permit planning for plenty. Their automatic reactions, on coming into power, were thus toward minor modifications of the established order. Only where this order had disestablished itself did they, in the crisis of the moment, devise expedients that departed from the familiar. In more cases than was realized at the time, they used government to subsidize scarcity.

Their lot since has been an unhappy one. The relative prosperity of 1936 and the first half of 1937 seemed their justification, and they accepted the mild applause that came to them, not a few departing from official posts to be embraced by private industry. Then came disturbances to their peace of mind. Renewal of the depression showed that they had hardly touched the causes of our economic malady. In the effort to recover themselves, they began to adopt policies which contradicted those so recently offered. They had suspended the anti-trust acts. They had been in collusion with big business. But now the anti-trust acts must be revived and reinvoked. They had exerted themselves for higher prices, only to wish later for lower ones. They had threatened the electric utilities, only to beg them to make heavy investment in plant extension. They had filled the relief rolls, afterward to pare them severely.

But the greatest embarrassment of these economists is in the fact that an ever larger section of the American people has moved on beyond them in conviction. It is a primary mistake to try to induce scarcity while millions need the goods which are destroyed or not produced. This belief, slow in awakening, is a public economic conclusion which takes on the stubbornness of a moral tenet.

So when these men now come forward with books, they are put to it to explain. This is the case of Mr. Jerome Frank in his “Save America First.” He spends many pages in damning wishful thinking, and indulges in it himself without let-up. His thesis is that “the wise statesman today . . . will seek, so far as possible, to eliminate the evil aspects of | the profit system. He will give that system a fair trial.” He dedicates himself to “an elaborate series of experiments which will seek to show that a social economy can be made to work for human welfare by adjustments which leave the de- sire for private financial gain still operative to a very considerable extent.” An initial pose is that of putting the word capitalism in quotation marks. To the candid reader this does not imply thorough, tolerant understanding, the ability to see many aspects of a complicated situation. It argues, in the pass to which we have come, refusal to acknowledge fatal defects. The term capitalism is no deceptive rubric. It is an accurate description of a scheme of things which flourished and failed. It is a set of forces which stand defined in the business cycle, in unemployment, in wars for new markets, in the necessity of artificial scarcity if its own destruction is to be averted.

All of this Mr. Frank denies. Rut his expedients for managing capitalism so that it will produce stability and plenty in America—he eschews foreign trade—are shadowy. In the end he reposes faith in an appeal to younger business men to justify a stewardship of our resources. His brief concludes by abandoning analysis for exhortation. He would have us believe that we have suffered not from institutions tried and found wanting, but from inhibitions never brought clearly into the open. A national psychoanalysis will straighten out our conduct and usher in a new day.

The work on “Price and Price Policies” presents studies by Professor Walton Hamilton and his associates in eight industries ranging from whiskey to cottonseed, each important in itself and useful for purposes of exploration and illustration. The book has the sovereign virtue of combining particular scrutiny with a capacity for generalization. It is apparent throughout how many de facto controls there are in industry, how far competition has been diluted through collusion, coercion, and consolidation, quite apart from government intervention. Professor Hamilton has supplied an introduction and conclusion, both characterized by his facility in thought and expression. One must agree with him that “if competition is to be directed to proper ends, concretions become the materials of control; and whether the state undertakes regulation or industry takes the way of self-government, a continuous series of judgments must be grounded in fact, analysis, and understanding.” It is still true, however, that many of the vexations involved in a mixture of industrial forces and government guidance would not be present if price, under government ownership, became a means of accounting rather than the essential mechanism of production and marketing. These essays are mature and polished; if anything they do a little too much to sublimate the crudities of industry and commerce into the charm of rhetoric.


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